Senate committee hears proposal to allow limited investment of unclaimed‑property funds in rated foreign government bonds

State Treasurer Steven Johnson testified before the Senate Committee on Financial Institutions and Insurance in support of Senate Bill 232, which would permit the board of trustees that manages the Treasurer’s unclaimed‑property fund to invest up to 5% of the fund’s cash in dollar‑denominated bonds, notes or debentures of foreign governments that meet specified investment‑grade ratings.

Johnson told the committee that “currently, there is $681,000,000 in that fund,” and that the fund has been managed conservatively since the 2000s with a mix intended to limit volatility. He said the bill would restrict investments to developed economies rated at A‑/A3 or better by S&P, Moody’s or an NAIC‑accepted equivalent, and would exclude countries the U.S. State Department lists as state sponsors of terrorism and other authoritarian regimes. An amendment attached to the proponent testimony adds Fitch to the list of accepted rating agencies and clarifies that eligible securities must be dollar‑denominated.

Johnson described the investment rationale as modest: dollar‑denominated foreign government issues could add “about 80 basis points” on a three‑year issue and roughly “1.2%” on a five‑year issue in the examples he examined, but he also cautioned about downside risks, saying a $100 million position could lose “$1,000,000 or $5,000,000” if market values moved against it. He emphasized the proposal is intended as a small, tactical allocation — not a portfolio mainstay — and that the treasurer and KPERS staff would present specific purchases for trustee consideration.

Committee members pressed on operational safeguards: how earnings are treated, what happens on ratings downgrades, whether an explicit “foreign adversary” exclusion should be added, and how the 5% cap was chosen. Johnson said earnings are ultimately returned to the State General Fund under current practice (with some limited exceptions), that liquidation would be considered if a security fell below required ratings, and that the 5% limit was intentionally conservative to keep the exposure modest.

Alan Conroy, speaking for KPERS investment staff, described the Treasurer’s Unclaimed Property Fund as a separate trust that is not commingled with KPERS assets and said staff could administer the changes without actuarial or fiscal impact to KPERS. Conroy reiterated that the bill already includes a prohibition on buying securities from countries designated by the U.S. State Department as state sponsors of terrorism.

The hearing closed without a committee vote on SB 232. The bill received proponent and neutral conferee testimony and drew committee questions focused on eligible‑country lists, ratings thresholds, distribution of earnings to the State General Fund, and the policy question of when and whether the state should take ownership of unclaimed property.